Within the last few weeks, tens of thousands of employees had left the world’s largest iPhone factory in Zhengzhou, central China, and violent protests had flared up over a COVID-19 lockdown and uncertainty over hiring bonuses.
According to reports, the Foxconn factory in Zhengzhou is Apple’s largest iPhone manufacturer, producing approximately 70% of iPhones globally.
A Foxconn source told Reuters on Thursday that the crisis could reduce factory output by at least 30% in November, a development that has weighed on Apple’s stock price.
The Foxconn plant, which was hit hard by China’s strict COVID restrictions and was facing critical year-end holiday demand, was offering enticing hiring bonuses and excellent pay.
The bonus and pay grievances prompted factory workers to confront Foxconn management at the plant – essentially a city of more than 200,000 employees – resulting in sporadic clashes that made international headlines.
Foxconn workers in COVID masks clashed with security personnel in white hazmat suits holding plastic shields in a rare instance of large-scale labor unrest in China. Some protesters used sticks to smash surveillance cameras and windows.
In addition to the challenges of keeping factory lines running under a closed-loop system mandated by Beijing’s zero-COVID policy, which requires workers to be isolated from the outside world, Foxconn’s turmoil exposed communication issues and worker mistrust of management at Apple’s top supplier.
According to factory workers, they were afraid because Foxconn began moving COVID-positive people to a vacant housing project without disclosing the infections and told workers to eat in their dormitories rather than company canteens, but then failed to separate infected workers from others.
The company previously apologized to employees for a pay-related “technical error” that occurred during the hiring process. It has not explained why it was paying people to leave quickly after promising them hiring bonuses.
Foxconn announced in late October that the situation had been brought under control and that it was coordinating with other plants to increase production.
If the problems continue into December, Foxconn and Apple will lose around 10 million iPhones, resulting in a 12% drop in iPhone shipments in the fourth quarter, according to KGI Securities analyst Christine Wang.
Foxconn executives said the company was in a difficult situation, having to speed up shipments during Apple’s busiest holiday season while adhering to local government’s strict COVID guidelines.
“It was the busiest time of year,” a senior Foxconn official was quoted in repoirts as saying who also stated that an outbreak of Covid in the Zhengzhou campus in October caught the company off guard and caused “a mess.”
“There was pressure on everyone, including local government,” the official said, referring to local governments rushing to assist in the recruitment of replacement workers.
The incident at the plant was the “epitome” of what companies face under China’s strict COVID policy, and it will “push production lines out of China at a faster pace,” according to the official.
According to Marina Zhang, an associate professor at the University of Technology Sydney’s Australia-China Relations Institute, Foxconn’s woes sent a message to companies attempting to keep Chinese operations running while keeping workers COVID-free in accordance with national policy.
“A company’s internal communications can be totally overpowered, overwhelmed by social media,” Zhang said. “They lose power to social media – no one is going to listen to them.”
(Adapted from Reuters.com)